Heating-oil dealers challenge Pa. utility's practices

September 04, 1991|By Knight-Ridder News Service

PHILADELPHIA -- New homes are sprouting like summer corn across much of northeastern and central Pennsylvania, but James Yeager and heating-oil merchants like him say they haven't been able to cash in on the action.

In a lawsuit filed in U.S. District Court in Philadelphia, the dealers contend PP&L has unfairly monopolized the area's heating market over the last decade by paying off housing contractors to install electric heat pumps in new houses.

PP&L denies the allegations.

PP&L serves a 29-county, 10,000-square-mile area in central and northeastern Pennsylvania.

The suit seeks $20 million in damages from the Allentown utility.

"Most of the heating companies in the area are second- and third-generation family-owned businesses," said Mr. Yeager, owner of Yeager's Fuel Inc. of Allentown, a business his father began 52 years ago. "Some are mom-and-pop operators with one truck. We can't compete against electric utilities when they pay incentives to install electric heat."

If successful, observers say, the suit could clear the way for independent energy suppliers elsewhere in the nation to challenge the competitive practices of large utilities.

A victory for the dealers also could give new homeowners a choice of cheaper energy, industry sources say. Electricity costs about three times more than the equivalent amount of heating oil.

According to the lawsuit, filed in mid-August, the payments were made in cash to developers, contractors and manufacturers and came out of monthly revenues collected from PP&L's customers. That would be a violation of Pennsylvania Public Utility Commission regulations, the suit alleges.

PUC officials declined to comment on the suit.

The suit came as a surprise to officials of PP&L, which last year achieved the electric industry's prestigious "utility of the year" ranking for outstanding performance to customers, shareholders and employees.

Over the last decade, the company has established itself as an aggressive promoter of "electric houses" and more efficient use of energy.

Its marketing strategy has paid off in revenues and a dominant share of the heating market for new homes.

PP&L's revenues have more than doubled, going from $886.7 million in 1980 to $2.4 billion last year. The growth has been helped by a boom in residential construction in the northeastern part of its service territory and the construction of Interstate 78, which connects Allentown and northeastern Pennsylvania to New York City.

The state's second-largest electric utility, PP&L has achieved the revenue growth since 1985 without raising its residential base rates, which are about two-thirds as high as those of Philadelphia Electric Co., the state's largest electric utility.

PP&L's marketing efforts also have paid off handsomely in market share.

The utility has captured 70 percent of the heating market for all new homes and apartments in its service area, a high percentage by industry standards.

Nationwide, 37 percent of all new single-family residences were heated with electricity in 1988, according to the U.S. Census Bureau.